Well, the answer varies by policy, so you'll definitely want to look closely at the policy certificate before you purchase trip insurance.
Maximum Payouts
The typical travel insurance policy covers baggage loss, but only up to a certain pre-determined amount. Most policies include a per-person maximum payout, typically ranging from $500 to $2,500. Quite a few policies also have "per article" limits, usually $250 per item. Some also have a "first article maximum" that is higher than the "per article" limit. A few policies have deductibles, typically $50 per claim.
That's actually the easy part. The most complicated parts of baggage loss coverage have to do with which items are actually covered and how much you'll receive if you have to file a claim.
Covered Items
Let's take a look at the items most travel insurance policies cover. The basic definition of "baggage and personal effects," according to the SquareMouth.com website, is "luggage, personal possessions and travel documents." Items you ship ahead, intending to retrieve them at your destination, aren't covered.
So far, so good. Unfortunately, each underwriter has a different, detailed list of items that, although they might happen to be in your suitcase, aren't covered at all. For example, CSA WebDirect's policy doesn't cover animals (sorry, Fido), sunglasses, contact lenses, prescription medications, telephones, computer hardware or software, professional equipment, keys, cash or credit cards. AIG TravelGuard Essential Basic has a similar list; medications aren't excluded, but sporting equipment is. Other underwriters exclude cameras and accessories, brittle and fragile items, musical instruments, stamp collections – you get the idea. Reading the fine print is essential.
Now, if you're a writer like me, you carry professional equipment (laptop, camera, guidebooks and maps) on every trip. So much for those items. My husband's military uniforms are out, too, I suppose.
Additional complications arise when you consider limits on high-value items. Most travel insurance policies include a limit, generally a total of $500, on coverage of items they consider to be high-value. This includes jewelry, watches, anything made of gold, silver or platinum (even partially), fur-trimmed items, cameras and accessories, at a minimum.
If you own a home, you may be able to obtain insurance riders on your high-value items. It might be wise to consider this option if you wear your Rolex when you travel.
How Much Will I Receive?
You'll also need to figure out how much the policy will actually pay if you need to file a claim. CSA WebDirect's policy, for example, covers the lesser of "Actual Cash Value," which is defined as "the purchase price less depreciation," the "cost to repair or replace" the item or $300. You may also need to provide receipts or other documentation of value. Some policies will only pay 70 percent of Actual Cash Value if you can't provide a receipt.
Damage Not Covered
Each policy certificate lists types of damage not covered. Typically, normal wear and tear and breakage of fragile or brittle articles aren't covered. From there, things get interesting. Travel Insured Trip Protector Lite Expanded, for example, doesn't cover damage from "inherent vice or damage," whatever that might be, or from "radioactive contamination." HTH Trip Protector Preferred also will not cover damage from "rodents, animals, insects or vermin," nor will they cover damage from "electrical current, including electrical arcing." Most disturbingly, the policy won't cover "mysterious disappearance" of your baggage. TravelSafe Premier has similar conditions, and also excludes "theft or pilferage from an unattended vehicle."
When you can't file a claim for "mysterious disappearance" (aren't all unexplained disappearances mysterious?) and you factor in the list of non-covered items and per-item payment limits, purchasing travel insurance solely to cover potential baggage losses doesn't seem worthwhile, at least to me. It's far easier to pack items you can afford to lose, leave your fancy jewelry at home and insure your professional gear or high-value items through a homeowner's policy.
The Bottom Line
This doesn't mean travel insurance is worthless – far from it. If illness or weather could alter your travel plans and your trip payments are nonrefundable, you might want to take a very close look at travel insurance. Baggage loss protection is a nice extra if you're already planning to insure your trip against cancellation or financial default.
You'll need to make this decision based on your own circumstances. If you can't afford to lose your entire trip investment, you should examine your travel insurance options along with your trip itinerary.
